Information governance is old news at Nuix Analyst: David Horrigan 18 Jul, 2014 Sydney-based software developer Nuix was one of the early tech proponents of information governance (IG), after being known for its indexing engine for e-discovery, most notably in data processing. As the company's growth has continued (with about 57% annual growth in the fiscal year that just ended on June 30), it has expanded and, at the same time, refined its strategy. Rather than marketing its Nuix Engine and related products as general information governance offerings, the company has created semi-autonomous business units in six key areas: cybersecurity, e-discovery, IG, investigations, migration of email archives to the cloud and an OEM program. At the same time, the company has made moves to Web-based products with Nuix Director and the recently released Nuix Web Review and Analytics. The Nuix strategy is now to focus on these six areas, with the Nuix Engine being the driver of them all. The 451 Take It almost seems as though Nuix helped get the IG party started, only to de-emphasize it once the party started heating up. However, we think the Nuix strategy is a good one. First, corporate management has been slow to make IG a priority; IG is difficult to define, and it's rare when a corporate decision-maker says, 'Okay, let's get an outside vendor to run our information governance.' Instead, they want a vendor to help with specific IG tasks, such as cybersecurity, e-discovery and investigations. In addition, although IG implementation may be slow, IG marketing isn't, and Nuix faces much larger competitors using their resources to be comprehensive IG providers combining software and services. From demonstrations we've seen of the uses of the Nuix Engine over the years, we think Nuix is one of those companies that really has built a better mousetrap, and the company has made moves to address areas we've seen as weaknesses in the past, namely, ease of use and review capabilities. Overall, Copyright 2014 - The 451 Group 1
rather than trying to be an IG generalist, we think the company is smart to focus on specific elements of IG where its Nuix Engine excels. Nuix's growth continues to exceed many of its competitors'. The trick for Nuix is the challenge faced by many growing tech firms: maintaining its momentum while larger behemoths lurk. Context Founded in 2000 and beginning commercial production in 2006 after six years of R&D, Sydney-based Nuix has been an early proponent of IG as IG has supplanted predictive coding as the hot topic in legal e-discovery. Believing the Nuix Engine, the company's high-performance searching and indexing engine, was ideal for handling 'big data,' the company made IG a focal point of its marketing efforts, after having been known for a while as the new kid on the block for e-discovery processing. The idea was to show that Nuix and its Nuix Engine were for more than just processing. However, as we've noted before, despite the hype from marketers and attention from legal technology conference organizers, we've seen less of a rush by corporate executives in making IG an organizational priority. Having said that, whether it actually is a priority among business leaders, we think it should be for a number of reasons, including the ever-increasing amounts and types of information in an era of big data, the legal liability and regulatory requirements corporate data trigger and the prevalence of BYOD among employees. Nuix has by no means abandoned IG. Instead, the company has made IG part of an overall strategy rather that the focus of it. The company is now focusing its efforts on six areas: cybersecurity, e-discovery, IG, investigations, migration and an OEM program. The company reorganized itself in 2013 with semi-autonomous business units focusing on these business and product areas, with the idea being that the company has matured enough to develop dedicated units that can speak the varying languages of various verticals. The company's strategy is based, in part, on the move of corporate computing to the cloud, with its migration business that the company calls Intelligent Migration. Although Nuix management knows the legal sector's resistance to putting sensitive legal and regulatory data on remote servers (and that's before one even gets to the legal jurisdictional issues), the company sees the cloud as the future, and it is currently working on about 30 engagements where it is migrating customers from on premises to the cloud. Copyright 2014 - The 451 Group 2
Nuix now has about 1,100 active customers, with about 700 of them being legal service providers and consulting firms, including DTI, Epiq Systems, FTI Consulting (also a software integration partner), Huron Consulting and Big Four consulting firms Deloitte, Ernst & Young and PricewaterhouseCoopers with the business split about equally between cloud and on-premises. In addition, Nuix is becoming an OEM provider for other company's products. The privately held company does not release revenue data, but we estimate annual revenue to be between $50m and $75m. The company does say that revenue has increased about 2,000% over the last five years, and roughly 57% in the company's fiscal year ending June 30, and the company now has about 230 employees. As we have noted many times, there has been a shift over the last several years in the e-discovery client base, from law firms to corporate legal departments, and Nuix's business is no exception. Law firms make up only about 5% of the company's direct clients, although some of Nuix's service provider clients use the company's products for their law firm customers. Breaking down the company's business lines is not an exact science. For instance, although e-discovery makes up about 35% of the company's business, and IG makes up about 15% of revenue, most if not all of the company's investigations business could also be considered e-discovery, and this investigations/e-discovery combination comprises about 85% of Nuix's business. Products When thinking of the company's offerings, there are two overriding themes: 1) Nuix is a software developer, not a service provider, and 2) although the company has a wide variety of product offerings, the backbone of these products is the Nuix Engine. On software vs. services, we still maintain that, in e-discovery and IG, software and services are intertwined inexorably. It's just that Nuix not unlike its software integration partner, kcura lets its service provider partners handle the services side. As part of this model, Nuix is developing a global partner program with an internal challenge management team to support it. On the Nuix Engine, the idea of it being the backbone and focal point of the company's products is the idea behind the OEM offering, which was announced at LegalTech this year. In essence, customers can now buy the engine without the car. Of course, Nuix believes the car is worth buying as well. As noted above, in addition to the Nuix Engine as an OEM offering, the company has diversified its technology and marketing to address five additional key areas: cybersecurity, e-discovery, IG, investigations and migration of email archives to the cloud. The company has added features on top of the Nuix Engine to address customer needs in these areas, such as its Luminate product for IG and migration. In addition, last year, the company added Nuix Director, its first Web-based e-discovery offering, and last month, it Copyright 2014 - The 451 Group 3
released Nuix Web Review and Analytics, which as the name implies allows teams to review data via the Web. To make it more versatile, the company designing the product to work both with the Web-based Director and the company's desktop application. In addition, to augment its IG, cybersecurity and other capabilities, the company is developing search and analysis capabilities that work without generating an indexing footprint. Also not unlike its competitors, AccessData and Guidance Software Nuix is developing a training program, the Nuix Academy, in Northern Virginia, close to its US government customers. The company's central offering is now in version 5.2. Released this April, Nuix 5.2 updates to its production, imaging and quality control (QC) capabilities, workflow enhancements and updates to run natively on Apple's Mac OS and Linux, as well as improved integration with kcura's Relativity 8.1, which was released last November. Although there have been predictions e-discovery image productions will decline, legal customers continue to produce via image, and because the demise of the.tff production has yet to occur, Nuix continues to advance those capabilities. The company will be releasing a new full version, Nuix 6.0, this summer, and although the company does believe the cloud is the future, it's covering its bases with the planned release of an end-to-end corporate appliance in September. Competition It goes without saying that as the company has expanded its list of offerings, it's expanded its list of competitors. Nuix's traditional competitors have been in the areas of e-discovery data processing: IPRO Tech and LexisNexis' LAW PreDiscovery, and on the investigations/forensics so-called 'left side' of e-discovery's Electronic Discovery Reference Model (EDRM), most notably, AccessData and Guidance Software. However, many other vendors have made moves into IG, including, but not limited to Exterro, HP Autonomy, IBM, OpenText, Recommind, RSD, Symantec and ZyLAB. In addition, Mindseye Solutions has entered the e-discovery processing space. SWOT Analysis Strengths Weaknesses Nuix has excellent technology that put the company in the right place at the right time to take advantage of the need to process big data. In addition, although Nuix was once seen mainly as a robust tool for the technologically savvy, the company has made strides most notably in its Nuix Web Review and Analytics offering to make its offerings easier-to-use options for some lawyers (and others) who may be challenged by technology. Although the company is addressing the need for review tools, the right side of the EDRM is still a weakness. Nuix simply isn't on many short lists for review. We understand (and agree) with Nuix's strategy of not being a 'jack-of-all trades, master of none,' but review is an important part of IG, and we hope the company will continue its development in this area with internal technology or its tight integration with kcura's Relativity. Copyright 2014 - The 451 Group 4
Opportunities Threats Big data is a big opportunity for Nuix. The company's Nuix Engine is well suited to address big-data challenges, and we like the company's new marketing approach of creating specialized, semi-autonomous business units to address specific customer needs such as cybersecurity, e-discovery and investigations rather than a having a general IG strategy. Although the new marketing approach focusing on specific Nuix strengths will help it, the company still finds itself in an IG market filled with much larger players with vast international resources and extensive marketing budgets. Copyright 2014 - The 451 Group 5
Reproduced by permission of The 451 Group; 2014. This report was originally published within 451 Research's Market Insight Service. For additional information on 451 Research or to apply for trial access, go to: www.451research.com Copyright 2014 - The 451 Group 6